• Saturday, June 22, 2024
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BusinessDay

COMMENTARY: With nothing to show, Nigeria’s money printing spree backfires

Cash crunch: Households unable to stock up home ahead of Ramadan

The Central Bank of Nigeria (CBN) has “printed” about N21 trillion alone since 2015 for lending to the federal government – some will say it is easier finding a needle in a haystack than where all that money went.

The country’s widening infrastructure gap and worsening human development outcomes make a mockery of how much the government has borrowed since 2015.

The country’s debt stock, which was N12 trillion as at June 2015, has jumped to N44 trillion, implying a jump of N32 trillion within that period.

In addition to the CBN loans of N21 trillion, that would mean Nigeria has borrowed N53 trillion in total since 2015.

In that time, poverty has jumped, the economy has suffered two recessions and the infrastructure challenges, from bad roads to inadequate power supply that have dogged Africa’s most populous nation, are no less daunting.

Yet supporters of the current administration say most of the borrowed money has gone into infrastructure development, notably railways. But the country’s most critical transport infrastructure have been stuck.

Take the Lagos-Ibadan Expressway, the country’s oldest, which has been under repairs for decades. Its sheer importance to the economy should make it a top pick if Nigeria was keen to back critical infrastructure projects.

The expressway connects Ibadan, the capital of Oyo State and Lagos, Nigeria’s largest city.

It is also the major route to the northern, southern and eastern parts of Nigeria. Sections of the road have been under construction for decades. Only last Friday, work on the key highway was suspended yet again, this time to ease traffic, after several stop-starts in the past due to lack of funding.

It’s 2023 and the highway remains incomplete, yet the government has borrowed to the hilt.

One area some would say part of that borrowed money has gone is to the controversial petrol subsidy. Zainab Ahmed, the finance minister, did admit last week that the government has been borrowing to fund the petrol subsidy.

In her words, “Fuel subsidy cost was a very high one; we have been funding it from borrowing.”

Borrowing to subsidise petrol consumption is quite an irony for a country that is sinking under the weight of debt service costs.

The same minister said the decision to securitise the N22.7 trillion CBN loans, a request by President Muhammadu Buhari which lawmakers are yet to approve was to reduce the burden on the Federal Government, as interest on the Ways & Means could hit N2 trillion this year, from N1.2 trillion, if nothing was done.

Read also: Nigeria’s yawning deficit signals further breach of CBN Act

If Buhari’s request does not go through, the government will continue paying about 22 percent as interest on Ways and Means. Let’s just say such expensive borrowing going to petrol subsidy is not the smartest of decisions.

Nigeria will keep the costly but popular petrol subsidy until at least mid-2023 and has set aside N3.36 trillion ($7.5 billion) for it.

The government spent N2.91 trillion ($7 billion) on the subsidy between January and September 2022, according to state-owned Nigerian National Petroleum Company, a cost the government has blamed for dwindling public finances.

The rising subsidy bill has also denied Nigeria of the windfall other oil-exporting countries benefitted from the surge in oil prices last year. While petro-currencies gained, the naira tumbled in the more market-reflective parallel market.

Buhari failed to remove the subsidy despite several false starts as he succumbed to protests by the Labour union. He has now set a date for the end of subsidy, a month after he would have left office.

In a sign of the pain the wasteful petrol subsidy practice is causing Nigeria and the bulk of its people, all key presidential candidates ahead of next month’s elections have all promised to end it.

The question they need to answer is how and when they would end it.